Russia, Venezuela Discuss Ways To Prop Up Oil Prices

Russian President Vladimir Putin and his Venezuelan counterpart Nicolas Maduro discussed ways to try to stabilize world oil prices September 3 but did not propose specific actions.

Meeting on the sidelines of a World War II commemoration in Beijing, Maduro said the two top oil states had agreed to "initiatives" to stop the freefall in oil prices since last year, but declined to say what they were.

"The initiatives will be known once they are in full swing," Venezuelan state news agency AVN quoted Maduro as saying. A senior Russian source told Reuters that not much concrete was expected to come out of the meeting, however.

Russia vies with Saudi Arabia as the top oil producer in the world, while Venezuela boasts the largest untapped oil reserves in the Western hemisphere. Both countries are highly dependent on proceeds from the sale of oil to feed government revenues and drive growth in their economies.

Oil prices have roughly halved in the last year to around $50 a barrel largely as result of a glut of premium crude supplies in the United States and the refusal of the OPEC oil cartel and other top producers to cut output.

Venezuela, a hard-line member of the cartel, has pushed for vigorous intervention in the market, including coordinating production with non-OPEC producers like Russia.

Russia is not a cartel member and has never officially coordinated its levels of production with the Organization of Petroleum Exporting Countries.

Kremlin spokesman Dmitry Peskov said that while the two nations agreed on the need to work towards boosting oil prices, "President Putin drew attention to the fact that there could be no direct actions, this is a market process. There are lots of factors which are having an impact and that should be taken into consideration very carefully."

With the solvency of the government dependent on tax revenues from oil exports, Moscow has so far been unwilling to deliberately cut its crude oil output to support prices.

Russia, in fact, has been ramping up output this year, extracting oil at a post-Soviet record high of around 10.7 million barrels a day and adding to the supply glut on world markets.

Like OPEC, Moscow has kept production high to defend its market share.

OPEC Persian Gulf members such as Saudi Arabia and Kuwait, which can profitably pump oil at today's low prices, drove the group's strategy shift last year to allow prices to fall to defend market share.

But Russia and Venezuela are much more hard pressed. Both have plunged into recession in the wake of the oil price collapse.

Venezuela appears near an economic breaking point. It imports the vast majority of the basic goods it consumes with oil money, which accounts for 96 percent of its foreign currency

But that cash is now drying up, leading to shortages of consumer goods and a severe recession. Prior to arriving in Beijing, Maduro made a stop in Vietnam in search of financial help "during difficult times," AVN said.